78-5
78-5
San Francisco, California
July 14, 1978
Re: Financial Code Section 3350 — Opinion Request
Dear ________:
This is in response to your letter of June 29, 1978. which was received in this Department on July 3, 1978.
In your letter you asked whether, under Financial Code Section 3350, ________ would be prohibited from making a real estate loan to a borrower, where the agent of the borrower or seller is married to the manager of the Bank’s Mortgage Division, and such agent is entitled to a commission for her efforts in making the real estate sale.
Financial Code Section 3350 provides: “Any director, officer, or employee of a bank…who asks for or receives, or consents to receive any commission, emolument, or gratuity or any money, property, or thing of value for his own personal benefit or a personal advantage for procuring or endeavoring to procure for any person any loan from such bank. . . is guilty of a felony. It has been previously held by the California Attorney General that it is not a crime for a bank director, officer, or employee to accept a bona fide sales commission or profit on the sale of goods in which he deals when the transaction involves a loan from his related bank, provided such thing of value is accepted in the ordinary course of his independent business and not in his capacity as a banker or for influencing his judgment as a banker or the judgment of his fellow bankers. The director, officer, or employee must not act as an approver of such loan in his capacity as a banker; he must not indirectly participate in authorizing a loan as by posting collateral or security or executing an endorsement or guarantee; nor may he accept the thing of value for exerting pressure or influence, directly or indirectly on those who must approve the loan. For the purpose of determining whether the director, officer, or employee has exercised pressure or influence on the approving bankers, it is necessary to examine all the circumstances of the transaction and the relationship between the borrower and the director, officer, or employee and between the director, officer, or employee and the approving officers and directors of the bank. See 47 OPS. CAL. ATTY. GEN. 100 (1966).
Based on information supplied in your letter, and using the Attorney General’s opinion as a guideline, it appears that the wife of the manager of your Mortgage Division is accepting a bona fide sales commission in the ordinary course of business and for the standard amount. Your letter shows a absence of circumstances which would indicate that the commission is being paid by the bank, or is stipulated or accepted for obtaining the approval of the loan or for exerting influence on bank officers in behalf of the customer-loan applicant. The wife is merely being paid a fee for services rendered as an agent of the borrower or seller. However, there is a possibility that because the wife of the manager of the Mortgage Division has referred a customer to the bank and, if such a loan is not approved, no commission will be paid to the wife because the sale was not completed and therefore both the husband and wife would not be able to enjoy the benefits of a received sales commission, that the manager might be in position to indirectly exert pressure or influence on those who must approve the loan. To avoid the appearance of impropriety, therefore, great care must be taken to insure that loans made by ________ to a borrower, where the wife of a director, officer, or employee of the bank is the real estate agent of the borrower or seller, are made on the basis of a true determination of the credit worthiness of the borrower. Moreover, great care must be taken to see that the manager of the Mortgage Division is in no way connected with the critical credit decision on whether or not to grant the loan.
Accordingly, it is the Department’s current opinion that it would not be a violation of Financial Code Section 3350 for ________ to make a real estate loan to a borrower where the wife of the manager of its Mortgage Division is acting as the real estate agent of the borrower or seller and thus would be entitled to a commission for her efforts on the sale of the real estate. Obviously, no distinction can be made between the wife acting as an agent for the potential borrower or acting as agent for the seller.
I trust this has answered your inquiry. If you have any further questions, please do not hesitate to contact us.
Very truly yours,
CARL J. SCHMITT
Superintendent of Banks
By 0riginal signed by Joseph W. Russell
JOSEPH W. RUSSELL
Counsel
JWR/jo
cc: Harry Doyle
ODDS